ТEME, г. XL, бр. 4, октобардецембар 2016, стр. 13271348

Оригинални научни рад DOI: 10.22190/TEME1604327S

Примљено: 22. 7. 2016. UDK 368.021:336.71

Одобрено за штампу: 17. 10. 2016.

REALITY AND PROSPECTS OF BANCASSURANCE AS AN INSURANCE SALES CHANNEL

IN THE REPUBLIC OF SERBIA

Jelena Z. Stanković1*

, Evica Petrović1, Nevenka Vojvodić-Miljković

2

1University of Niš, Faculty of Economy, Niš, Serbia

2Erste Bank a.d. Novi Sad, Branch in Niš, Niš, Serbia

*jelenas@eknfak.ni.ac.rs

Abstract

The aim of every business activity is maximising profits, which explains the tendency of business entities to make products and services readily and easily available for customers. The insurance activity is not free of placement problems. In order to survive, an insurance company must constantly follow the trend of the development of services and distribution channels. As an emergence of global insurers has raised the issue of the placement of insurance services, innovations related to the placement of insurance services will be the subject of this paper. However, the success of the placement of services is dependent upon the fulfilment of the following preconditions: the service is of great quality; it is adequately distributed – available, its price – the insurance premium – suits the quality and is competitive; the service is presented to customers in a quality manner, while the sales personnel is highly motivated to do their job. The merger of a banking and insurance subject may result in the reduction of costs, as well as in spurring the synergistic effects and an increase in revenue. New technologies, new approaches and dexterities of businessmen contribute to delivering better business results.

Key words: bancassurance, promotional tools, sales channels, insurance services.

РЕАЛНОСТ И ПЕРСПЕКТИВА БАНКООСИГУРАЊА

КАО КАНАЛА ПРОДАЈЕ УСЛУГА ОСИГУРАЊА

У РЕПУБЛИЦИ СРБИЈИ

Апстракт

Циљ сваке делатности је максимирање добитка, због чега се настоји да се про-

изводи и услуге што више приближе купцу. Делатност осигурања није лишена про-

блема пласмана. Да би опстало, неопходно је да друштво за осигурање непрестано

прати тенденцију развоја услуга и начина дистрибуције. Појава глобалних осигура-

вача актуелизирала је питање пласмана услуга осигурања, стога су иновације у пла-

сману услуга осигурања тема овог рада. Међутим, успех пласмана услуга осигурања

зависи од испуњености следећих претпоставки: услуга је квалитетна, правилно ди-

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стрибуирана – доступна, њена цена – премија осигурања одговара квалитету и иста

је конкурентна, услуга је квалитетно представљена купцима, а запослени у продаји

мотивисани су за рад. Спајање банкарског и осигуравајућег субјекта може за резул-

тат имати смањење трошкова, а долази и до остварења синергетског ефекта и пове-

ћања прихода. Нове технологије, нови приступи и вештине пословних људи допри-

носе остварењу бољих пословних резултата.

Кључне речи: банкоосигурање, методе промоције, канали продаје, услуге

осигурања.

INTRODUCTION

Specifics of the insurance service are reflected in the following

features: its trust-based relationship (since it represents a written sales

promise), the long-term purchasing opportunities and long-term payment,

the legal obligation of buying certain insurance services (the services of

automobile liability, for example), its complex structure (the service before

concluding a contract, during the contract validity and after the expiry of

the contact), the possibility of the use one and the same service by natural

persons and legal entities (property insurance, for instance), the impossibility

of its storage, etc. The above-mentioned facts serve as a confirmation of the

view that every kind of a product and service has a unique distribution

channel structure, and that every legal entity has its own distribution

channels which best suit the specificities of the sale of its product/service,

and, which are also a guarantee of its competitive edge. An inadequate

choice of channels may result in a substantial loss, regardless of the quality

and price level of the offered insurance service, since decisions which are

the result of a distribution policy, in the long-run, belong to the group of

strategic decisions.

The practice has shown that it is possible to distribute the insurance

service to the potential policy holders by means of numerous channels (a

personal sales network of an insurer, a sale with the help of insurance

representatives and insurance intermediaries, etc.). Some scientists believe

that an existence of “diverse services” accounts for a greater number of

distribution channels (Barrese, Doerpinghaus, & Nelson, 1995), while others

claim that such a great number of distribution channels is to be ascribed to a

difference in transaction costs (Regan, 1997), the imperfection of the market,

or differences in service qualities. For a channel to function efficiently and

effectively, regardless of the channel opted for, a partnership relation among

participants is required, which implies an efficient communication system,

mutual confidence in partners, continuity in maintaining partnership relations

and time-flow management. If a channel is a set of independent entities,

interested in personal short-term objectives, this inevitably leads to conflicts,

which result in damages, obstruction, and obtaining a benefit on the part of

one channel participant to the detriment of others.

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Insurance distribution channels in the Republic of Serbia are defined

by institutional solutions (Law on Insurance, 2014). Accordingly, 25

insurance companies operated in Serbia in 2014, while 19 of them were

majority-owned by foreign investors. Apart from insurance companies, the

sales network was composed of: 19 banks which were licensed to perform

insurance representation activities, 95 legal entities (insurance intermediation

and insurance representation companies), 111 insurance representatives

(natural persons – entrepreneurs), as well as 15,287 natural persons who were

licensed to perform insurance representation and insurance intermediation

activities (NBS, 2014). In the world, the prevalence of channels and channel

structures varies from country to country. In Poland, for example, the

dominant sales channel of insurance services in 2012 was insurance agents

(152,200 agents), while there were 76 insurance companies in 2007 and 58 in

2013 (Zieniewicz, 2014). In countries such as Malta, Austria, Spain, Portugal

and Italy the main sales distribution channel of life insurance is

bancassurance, while the number of insurance companies in Spain ranged

from 379 in 2004 to 264 in 2013 (Statistics European Insurance, 2014). In

some neighbouring countries such as Croatia, the major insurance

distribution channel during the period 2008-2012 was an internal sales

network (direct writing) of insurance companies, the number of which ranged

from 20 in 2006 to 27 in 2012 (HAFNA, 2013). In order to increase

their profits, many insurers use several insurance distribution channels

simultaneously. However, how many levels between the policyholder and the

insurance company there will be depends on the decision of the company

which is shaped by numerous factors. Taking into consideration the

complexity of the problem of the choice of insurance distribution channels,

the authors of the paper opted for considering the current state of affairs and

prospects of bancassurance, as one of the sales channels in the Republic of

Serbia. The basic hypothesis of this paper is that the advantages of

bancassurance in the Republic of Serbia have not been sufficiently exploited

in comparison to the traditional insurance distribution channels. This

hypothesis has been confirmed by the data indicating a negligibly low level

of the share of bancassurance premiums in the total premiums, as well as the

share of fee and commission incomes on the basis of bancassurance in the

total fee and commission incomes of commercial banks in the Republic of

Serbia. Bearing in mind the fact that only those services which are

compatible with the bank services have been sold by means of

bancassurance, and that banks and insurance companies are in the initial

phase of their co-operation in terms of the sale of insurance services, it is

necessary to take measures which will promote this insurance sales channel.

Since the results of the application of bancassurance as a sales

channel have not been published publicly yet, the data used in this paper

represent a part of an internal database of the National Bank of Serbia

(NBS), obtained upon the personal request of the authors. The methods of

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descriptive statistics, interviews and questionnaires, have been used in

accordance with the set objectives and hypothesis of the research.

ADVANTAGES AND DISADVANTAGES OF BANCASSURANCE AS A SALES CHANNEL

Various authors differently view the notion of bancassurance.

Bancassurance is believed to be a package of financial services composed of

one-stop-shop banking and insurance services (Babić-Hodović, 2003, p. 59-

63). Given the importance of cooperation, some authors highlight that

bancassurance is a strategy of inter-linkage between banks and insurers

aiming to operate on financial markets in a more or less integrated manner,

which implies the distribution of insurance products by banks (Swiss Re,

2002, p. 3). Analogous to this attitude is a view that bancassurance represents

a full exploitation of the synergy between banking and insurance so that

banking and insurance products can be economically placed to the common

client base (Magdić, 2009, p. 7). The claim that could be found in literature is

that bancassurance is an indicator of the disappearance of traditional barriers

between banking and insurance, while the very disappearance of barriers has

been caused by the following factors: the deregulation and liberalisation of

the financial service market, the appearance of giant financial companies

capable of rendering a wide range of financial services, competition,

globalisation, technological innovations, and an increasing sophistication of

clients’ demands.

The contemporary concept of the development of bancassurance

originates from France, when legal changes in this country enabled banks to

penetrate the insurance market in such a way as to offer certain insurance

services to their clients through the network of bank branches and bank

counters. However, if we observe the evolution of bancassurance, we may

differentiate among three developmental periods:

prior to 1980, when banks sold insurance guarantees as a direct

extension of their banking activities;

after 1980, when banks started developing and offering life

insurance services to their clients (Unit-linked policies and

Investment-linked policies)

after 1990, when banks diversified their product and service range

and started offering brand new services, other than life insurance.

During this period, the European Union (EU) adopted the first

directive on the sale of non-life insurance products through banks,

as a sales channel (2002/92/EC).

In spite of the fact that the practise has shown that there is no unified

bancassurance model, the most commonly applied ones are (Dumm & Hoyt,

2003):

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an integration model which is carried out through banking

channels with the help of bank employees – bank clerks, without

greater investment and further co-operation;

a specialist model in which the distribution of insurance services is

conducted by the experts who are usually employed by insurance

companies or who represent them, which implies a greater level of

business integration as well as a higher degree of investment in

information technologies and sales staff, and

a financial planning model, characterised by a team approach to

offering financial planning packages to every client with the aim of

satisfying the clients’ needs and in accordance with their financial

capabilities. Moreover, this model also implies joint ownership of

the clients’ database and services, long-term co-operation and

substantial investment.

There are also authors who believe that there is the fourth model of

bancassurance which presupposes the establishment of a new company in

one of the following ways: by bank acquisition or a merger/fusion of a bank

and an insurance company on an equal footing, by the creation of a financial

conglomerate which is composed of several dependent companies with a low

integration level, for instance a bank, insurance company and broker

association, aiming at offering incorporate financial services (Kapor, 2007, p.

320-321). Although the number of legal entities in a conglomerate may vary

over 1,000, all the entities are under the control of the parent company which

makes decisions and chooses a business strategy. However, there is a

possibility of fraud in all these combinations, as well as the possibility that

the business risk of one company within the conglomerate may affect the

operations of other companies. The research based on the survey of 500

banks carried out in Belgium, France, Germany, Italy, Holland, Spain and

Great Britain has shown that, for the time being, the first most common

model is the one which implies co-operation with only one partner – the

insurer. The second most common model is insurance companies – wholly-

owned bank subsidiaries. In all other countries, except for Belgium and

Great Britain, there are joint ventures of bankers and insurers. However, the

starting point of the researchers was that the centre of banking and

insurance business in the future will rest upon the co-operation of one bank

with several insurers or one representative.According to their results, at the

moment of the research this model was preferred by 26.6% of sample

banks (Gonulal, Goulder, & Lester, 2012, p. 51-66).

The motives of insurance subjects for the use of bancassurance as a

sales channel are diverse. Therefore,

banks perceive it as a means of the diversification of services and

as a source of additional fee income;

insurance companies see it as a tool of increasing the market share

and premium turnover;

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customers see it as an additional benefit in terms of reduced prices,

high quality services and the possibilities of doorstep delivery

(personal delivery) (Carry, 1998; Kumar,2000).

The advantages and benefits of partnerships through bancassurance

may be represented by Table 1.

Tablе 1. Advantages and benefits of partnerships through bancassurance

Partner Offers Gets

Bank Brand

Customer

database/distribution

Complementary products

Increase in fee incomes

Additional exit barriers for

customer retention

Insurance

company

Expertise in insurance and

damages

Increasing the capacity for

risk-taking

Access to the brand and

customer database

Profit margin on the core

business activity

Customer Brand loyalty

Identifying other products and

services

Products of a known

service supplier tailored to

the needs of customers and

cost reduction.

Indicators of the success of co-operation between the insurance subjects in this sales channel are: the number of insurance policies sold by a bank clerk, the insurance premium amount on every type of insurance, average premium amount per every bank clerk, the number of cancelled insurance contracts, gross and net commission income per every bank clerk.

The level of the development and use of bancassurance as well as gained experience in its practical application are differently viewed from the perspective of developed and developing countries. The group of factors that mainly determine the degree of the development of bancassurance comprises: culture, social status, demographic factors, regulatory frameworks, economic state, types of insurance businesses, the degree and method of bank and insurance organization. An observation of the European market points to the fact that banks were the dominant sales channel of life and pension insurance in Spain, France, and Italy. This situation is explained by the similarity of life insurance products and banking products, as well as by the possibility of claiming tax exemptions

1, while the penetration of bancassurance in

Germany, England, Holland and Switzerland is far smaller (Table 2), taking into consideration the regulatory provisions on bank control in insurance business with the aim of preventing possible abuses in business.

1 In France, until 1995, life insurance products were granted tax exemptions, such as tax

deductibility of up to 25% of premiums. Although the fiscal benefits were withdrawn in the

same year, the bancassurance market share increased from 60% in 2001 to 64% in 2006

due to the high degree of elasticity of demand for life insurance products.

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Table 2. The share of life insurance premium distributed through a particular sales channel in a total life insurance premium

during 2012 in some European countries

Ref.

no. Countries

Sales channels

Direct writing Agents Brokers Bancassurance Others

1 Austria 24.6% 4.8% 19.0% 45.0% 6.6%

2 Belgium 18.0% 4.8% 29.2% 47.4% 0.6%

3 Bulgaria 18.7% 39.3% 42.0% 0.0% 0.0%

4 Germany 4.1% 50.0% 25.6% 18.0% 2.3%

5 Spain 8.0% 12.7% 6.7% 71.4% 1.2%

6 France 16.0% 7.0% 11.0% 63.0% 3.0%

7 Croatia 41.4% 33.2% 1.2% 20.1% 4.1%

8 Ireland 50.9% 8.9% 40.2% 0.0% 0.0%

9 Italy 10.7% 16.3% 1.1% 71.9% 0.0%

10 Luxembourg 11.4% 60.0% 3.7% 25.0% 0.0%

11 Malta 1.8% 52.7% 3.8% 41.7% 0.0%

12 Poland 28.8% 24.0% 1.6% 38.9% 6.7%

13 Portugal 6.6% 17.7% 1.3% 74.1% 0.3%

14 Romania 10.6% 55.0% 20.8% 13.6% 0.0%

15 Sweden 17.0% 1.0% 32.0% 10.0% 40.0%

16 Slovenia 5.5% 78.2% 7.9% 8.3% 0.1%

17 Turkey 9.0% 13.0% 0.6% 77.4% 0.0%

18 England 16.9% 22.8% 60.3% 0.0% 0.0%

Source: Calculation of the authors on the basis of the data provided

by the European Insurance in Figures December 2014, Statistics N°50

In other world markets – South America, Asia, Australia, bancassurance

is also used as a distribution channel of life insurance. As far as the US is

concerned, the results of the supervision carried out by the American Bankers

Insurance Association points to the fact that, even though banks have

undertaken increased marketing efforts, the share of banks selling some

forms of general insurance premiums has slightly increased; nevertheless, the

bancassurance revenue is still unsatisfactory (bancassurance revenue is lower

than 0.5% of the total banking revenue).

As for non-life insurance, banks’ efforts to penetrate the property

and accident insurance markets have been noticeable. The result of these

efforts is the knowledge that in most European countries the household

market has become a substantial market for bancassurance (in France,

insurance companies sell these products through the network of Société

Générale Bank), while the share of this sales channel for motor insurance is

very small, under 5%, except in France and Belgium, where the market share

is slightly bigger (Table 3). The reasons for such achieved results related to

the sale of non-life insurance through bancassurance may be: lack of

knowledge about these products, great oscillations in results in comparison to

life insurance and a great number of claims.

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Table 3. The share of the sales channel in non-life insurance in 2012

Ref. no.

Countries

Sales channels

Direct writing

Agents Brokers Bancassurance Others

1 Austria 35.7% 18.2% 33.0% 5.7% 7.4% 2 Belgium 19.9% 10.7% 61.4% 7.4% 0.6% 3 Bulgaria 19.6% 34.4% 46.0% 0.0% 0.0% 4 Germany 4.6% 60.2% 24.8% 6.9% 3.5% 5 Spain 22.6% 35.3% 24.8% 10.2% 7.1% 6 Finland 46.2% 37.2% 4.5% 7.3% 4.8% 7 France 35.0% 34.0% 18.0% 12.0% 1.0% 8 Croatia 71.0% 17.5% 6.0% 3.1% 2.4% 9 Ireland 40.9% 0.0% 59.1% 0.0% 0.0% 10 Italy 8.1% 81.0% 7.6% 3.3% 0.0% 11 Luxembourg 13.8% 61.0% 24.2% 0.8% 0.3% 12 Malta 33.6% 42.5% 23.9% 0.0% 0.0% 13 Poland 15.3% 61.0% 19.3% 2.3% 2.1% 14 Portugal 10.7% 56.3% 17.1% 15.3% 0.6% 15 Romania 25.1% 36.2% 38.5% 0.2% 0.0% 16 Slovenia 30.0% 61.5% 5.5% 0.5% 2.5% 17 Slovakia 22.2% 64.3% 0.7% 0.0% 12.8% 18 Turkey 6.4% 67.7% 11.8% 14.1% 0.0%

Source: Calculation of the authors on the basis of the data provided by European Insurance in Figures December 2014, Statistics N°50

It is estimated that at the beginning of the 21st century life and non-life

insurance premium accounted for 20-30% of the bank profits in the continental part of Europe (Agnus, 2002, p.12-14). The practice has shown that there are also insurance companies which use exclusively one sales channel (a bank) to place their services (life insurance), while the earned premium amounts per employee are high (Erste VIG – an insurance company from Croatia (Bertoncelj, 2010). In countries with undeveloped insurance markets, there is a tendency of foreign insurers to join efforts with the local banking network, since it is a cheaper way of entering the market in comparison to greenfield investment or buyout – acquisitions of local insurance companies (Latin America). The need for bancassurance development has not only been accompanied by the interest of insurance companies. Namely, intense competition among banks and a reduced margin of interest rates have brought about an increase in administrative and marketing costs and limited profit margins for traditional banking products, which, eventually, resulted in the need for diversifying the product range of banks in order to increase their productivity and profitability. At the same time, the preferences of bank customers have changed in terms of the reduction in the share of conventional savings and deposits. As a matter of fact, life insurance products, which are commonly supported by a favourable tax treatment in many countries and which contain a prominent investment-related component, have turned out to be appealing to customers. In other

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words, increased competition and a risk of deposit outflow due to increased customer mobility have caused the banks to start co-operating with insurers in order to retain or “bind” the customers.

BANCASSURANCE IN THE REPUBLIC OF SERBIA

State of Affairs of Bancassurance in the Republic of Serbia

The Law on Banks (The Official Gazette of RS, no. 107 of 2nd

December 2005) explicitly enabled banks in Serbia to perform insurance representation activities. In terms of insurance business, a commercial bank may act in three ways: (a) as an insurance representative – bancassurance, (b) as the insured (the bank arranges the insurance of certain risks and pays the agreed premium for the insured risks to the insurance company which covers those risks) and (c) as the insurance beneficiary (when the bank conditions its customers to be insured so that they can be approved a housing loan or an overdraft). The above-mentioned roles of a bank draw us to the conclusion that it will be possible to start a business co-operation between banks and insurance companies and to create a legal framework for bancassurance. However, banks entered this sector only in 2007, when no more than five banks were present in the sales network of insurance services. The number of banks has increased over years. The biggest increase in the number of banks which perform insurance activities was recorded in the first years after the introduction of the Law – in 2008 (120% as much as in 2007) and in 2009 (36.36% as much as in 2008). The number of banks in the sales network increased in later years – by 6.67% in 2007 and by 12.50% in 2011, and has finally remained stable in the last 4 years with 19 banks performing the insurance representation activities (Table 4).

Table 4. Insurance market participants in the Republic of Serbia

during the preriod 2005-2014

Years Insurance companies

Banks

Representatives

Legal entities

Entrepreneurs Natural persons

2005 19 - 40 35 2,578 2006 17 - 44 87 3,982 2007 20 5 59 123 5,002 2008 24 11 65 122 8,190 2009 26 15 69 122 10,124 2010 26 16 77 117 11,418 2011 28 19 79 109 13,363

2012 28 19 84 105 14,123 2013 28 19 87 112 14,457 2014 25 19 95 111 15,287

Source: The annual reports of NBS on insurance supervision activities (2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014)

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The sales network of 19 banks comprised 1.097 points of sale

(bank counters, branch banks, points of sale), with 2.271 authorised and

certified bank clerks (NBS, 2011). The share of banks in the total number

of representatives – legal entities and entrepreneurs increased, ranging

from 2.24% (2007) to 8.09% (2011), and so did the share of premiums

charged through this distribution channel in the total insurance premium –

from 0.03% (2007) to 3.77% (2014). The insurance premium value charged

through bancassurance multiplied from period to period (Table 5).

Table 5. The percentage change in the insurance premium values, savings values and GDP during the period 2008-2014

Years

% change in

non-life

insurance

premiums

% change in

life

insurance

premiums

% change in

bancassurance

premiums

% change

in the

savings

value

% change

in the

GDP

2008 15.06 28.48 580.00 8.35 16.55

2009 -0.41 24.17 197.06 36.09 4.92

2010 3.32 18.68 117.16 28.84 6.50

2011 0.32 6.84 54.86 6.65 11.10

2012 4.83 18.63 29.34 16.67 5.18

2013 0.74 18.65 57.59 4.32 8.15

2014 6.85 13.79 26.05 7.12 0.83

Source: Calculation of the authors on the basis of the data provided byNBS

(the annual reports of NBS on insurance supervision activities

(2008, 2009, 2010, 2011, 2012, 2013, 2014) and internal database of NBS)

Based on the available information and promoted co-operation, Table

6 presents a business liaison of some banks and insurance companies in the

Republic of Serbia.

Table 6. An overview of some bancassurance market participants in Serbia

Ref.no. Bank Insurance company

1 Alpha Bank Srbijaa.d. Axaa.d.o.

2 BancaIntesaa.d. Delta Generalia.d.o.

3 Erstebankaa.d. Wiener Stadtischeosiguranjea.d.o.

4 Komercijalnabankaa.d. Dunavosiguranjea.d.o.

5 OTP bankaa.d. Basler a.d.o.

6 Raiffeisen Banka a.d. Uniqaa.d.o.

7 SociétéGénéralebankaSrbijaa.d. SociétéGénéraleosiguranjea.d.o.

8 Eurobank EFG a.d. Delta Generalia.d.o.

Wiener Stadtischeosiguranjea.d.o.

9 Hypo-Alpe-Adria Bank a.d. Grawea.d.o.

Given the observed growth in the charged insurance premiums

through various channels of distribution, the interdependency between

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variations in both life and non-life insurance premiums charged through

bancasurance and other distribution channels has been examined by the use

of the method of correlation analysis. The degree of linear quantitative

correlation between the observed variables has been computed by means of

Pearson’s linear correlation coefficient, which may be calculated by applying

the following formula:

(1)

The obtained results show that the correlation between the observed

variables is direct, i.e. positive (Table 7). High correlation coefficient values,

which approximate 1 in the case of correlation between bancassurance

premiums and life insurance, point to a strong linear correlation between all

insurance premiums, regardless of the distribution channel and savings.

However, the correlation does not reveal whether there is a causal

relationship between the observed variables, i.e. whether life and non-life

insurance premiums, and savings are conditioned by fluctuations in the

bancassurance value or whether these variables are conditioned by some

other factors which have not been identified in this paper. Therefore, for that

purpose, we will use the causality test, i.e. the Granger cointegration test.

Table 7. A correlation coefficient between the observed variables

Non-life

insurance

premium

Life

insurance

premium

Bancassurance

premium Savings

Non-life insurance premium 1.00000

Life insurance premium 0.93829 1.00000

Bancassurance premium 0.88862 0.98575 1.00000

Savings 0.90341 0.96916 0.93481 1.00000

Source: Calculation of the authors

The Granger causality test is a method which may determine

whether the fluctuations of one variable will affect other variables in the

future. A simple cointegration test, which has been used in this paper,

implies the determination of the relationship between two variables, Xt

and Yt, based on the determination of the parameters of the vector

autoregressive model (VAR) as specified in the equation:

(2)

(3)

2222 )()( yynxxn

yxxynr

tptptptptt uXbXbYYY ...... 11110

tptptptptt vYdYdXcXccX ...... 11110

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Testing the assumption H0 : b1 = b2 = … = bp= 0 proves that the

variable Xt does not affect the variable Yt, while testing the assumption H0 : d1

= d2 = … = dp= 0 proves that the variable Yt does not affect the variable Xt. It

is assumed that all other information or factors are irrelevant. The results of

the Granger test statistics, defined by the F-test and the significance level (p-

value), draw us to the decision whether to accept or reject the H0. The model

is extremely responsive to the number of time lags determined exclusively by

statistical analyses. If the number of lags is too small, the model will not be

specified correctly. On the other hand, a great number of parameters makes

the model complex. Due to the limited nature of the data in the time series,

the lag 1 has been used in this paper.

Cointegration has been tested at the sample of the observed data

series: non-life insurance premium (NLP), life insurance premium (LP),

bancassurance premium (BaP), and savings (S), whereby all the data have

been previously transformed by the application of the Box-Cox

transformation, which comes down to the logarithmization of the baseline

data. Since stationarity has been achieved by the differentiation of the

baseline data (Table 8), the transformed data, which have provided the

stationarity of the series, will be used in the further analysis.

Table 8. The results of the Dicky-Fuller stationarity test

Variable

Differentiation Coefficient Critical coefficient

value

Significance

level

(p-value)

ln(NLP)

0 -1.4717 -1.95 0.7736

1 -31.527 -1.95 0.01

2 -5.3634 -1.95 < 0.0001

ln(LP)

0 -2.8062 -1.95 0.2653

1 -1.3192 -1.95 0.8317

2 -1.5792 -1.95 < 0.0001

ln(BaP)

0 -2.3567 -1.95 0.4365

1 -1.0626 -1.95 0.9114

2 -1.8348 -1.95 < 0.0001

ln(S)

0 -1.2058 -1.95 0.8749

1 -3.3549 -1.95 0.08405

2 -2.1709 -1.95 < 0.0001

Source: Calculation of the authors

However, in spite of the significant correlation implied by high

Pearson coefficient values, the Granger cointegration test has not pointed

to the causal relation between the observed time series (Table 9).

1339

Table 9. The results of the Granger cointegration test at the sample of the analysed series

→ Bancassurance

premium ←

Bancassurance

premium

Non-life

insurance

premium

0.4306

(0.5791)

Non-life

insurance

premium

3.5590

(0.1999)

Life insurance

premium

2.6138

(0.2473)

Life insurance

premium

0.0191

(0.9026)

Savings 0.4484

(0.5721) Savings

0.0573

(0.8330)

Source: Calculation of the authors

As the noticed correlation between the analysed variables cannot

be used to explain the causal relation, and yet a linear upward trend in the

premium value is observable during the analysed period, in the regression

model, which may be presented in the following way:

ii xY 10

(4)

the time will be used as an explanatory variable to model and then to predict

the fluctuations of insurance premiums in the future period. The equation of a

straight line described by the formula 4 is completely determined by two

coefficients: β0 which shows the Y intercept of a straight line, and β1 whichis

the gradient/slope of a straight line, i.e. a tangent of an angle between the

straight line and a positive arm of the X-axis. The value of the coefficients

has been determined by the application of the method of least squares.

In the case of the regression model for non-life and life insurance

policies, the value of the coefficient is β0> 0, so that we can conclude that

the straight line indicates an upward trend (Table 10 and Table 11).

However, in the case of the model of bancassurance premiums (Table

12), the value of this coefficient is lower than 0, so that we can conclude

that the straight line shows a downward trend.

Table 10. The regression model of the non-life insurance premium

Regression model

parameters

β0 40,514.57

β1 1,519.18

R2

0.8798

МАРЕ 1.84%

Source: Calculation of

the authors

1340

Despite the insufficient length of the time series, the described

regression models show a substantial level of accuracy. In the case of the

regression model for predicting non-life and life insurance premiums, R2

takes the values greater than 0.8, which means that the model accounts

for 87.98% (non-life insurance), that is 98.59% (life insurance) of the

variability of the dependent variable. The accuracy of these two models

has been confirmed by the mean absolute percentage value (MAPE),

which is 1.87% with the model of non-life insurance premiums, and

3.08% with the model of life insurance premiums.

Table 11. The regression model of the life insurance premium

Regression model

parameters

β0 3,165.07

β1 1,531.10

R2

0.9859

МАРЕ 3.08%

Source: Calculation

of the authors

However, despite the high R2 value, the linear regression model

applied to modelling the bancassurance premium cannot be considered

accurate enough. The mean absolute deviation percent of the values

obtained by the model and real values points to the error of 22.07%,

which is the reason why it will be essential to reconsider modifying the

offered model or applying non-linear models in further research.

Table 12. The regression model of the bancassurance premium

Regression model

parameters

β0 -673,86

β1 375,02

R2

0,9440

МАРЕ 22,07%

Source: Calculation

of the authors

Given the risk of error, the models have been applied to predicting

the premium in the future period of 2015-2020. Based on the obtained

results (Table 13), it can be concluded that both premiums of all types of

insurance and bancassurance premiums will increase in the future period.

1341

Table 13. Forecasted values of insurance premiums in millions of RSD during the period 2015-2020

Y Х

2015 2016 2017 2018 2019 2020

Non-life insurance premium

54,187.18 55,706.36 57,225.54 58,744.71 60,263.89 61,783.07

Life insurance premium

16,944.93 18,476.02 20,007.12 21,538.21 23,069.31 24,600.40

Bancassurance premium

2,701.36 3,076.38 3,451.40 3,826.43 4,201.45 4,576.48

Source: Calculation of the authors

However, when it comes to the prevalent attitude of the banks in Serbia, bancassurance is believed to be a low-profit business. That is the reason why their interest in the development of this sales channel is low. According to the available data (Table 14), the share of commissions earned through bancassurance premiums varied from 5.38% in 2007 to 32.93% in 2011, while this share plummeted in 2014 to 24.57%. The beneficiaries do not contribute to the development of bancassurance either, since they have not developed a pronounced interest in various types of insurance offered on the market, while the insurance companies are still focused on their sales network.

Table 14. The share of the bancassurance premium in some

categories (%)

Years

% share of bancassurance premiums

in non-life and life insurance premiums

in total bank commissions

2007 0.033% 5.38% 2008 0.195% 12.50% 2009 0.566% 21.23% 2010 1.164% 30.26% 2011 1.778% 32.93% 2012 2.144% 31.51%

2013 3.243% 28.01% 2014 3.772% 24.57%

Source: Calculation of the authors

on the basis of the data of the NBS – the Supervision Sector

The bancassurance model present in Serbia represents an integrated offer of bank and insurance services. Furthermore, an introduction of insurance to the standard portfolio of bank products means a step forward in the development of bancassurance in our country. The orientation towards this kind of business activity enables the banks to broaden their scope of business by performing activities of insurance representation, which will eventually lead to a better positioning on the marker, and, hence, to an increase in the number of clients.

1342

Promotional Activities Related to Bancassurance as a Precondition of its Efficiency

Effects of bancassurance are not only the result of modelling its mechanism, but also of promoting its advantages by means of:

advertising, as a paid form of informing people and convincing potential policyholders through mass media communication,

personal selling, as a way of personally informing and convincing potential policyholders by mutual communication,

public relations, as an unpaid form of non-personal informing and convincing potential policyholders by media reports on insurance companies and their services, as well as by means of improving sales as a part of a promotional network which persuades buyers to make an additional purchase of an existing good or service.

In other words, the role of promotion in an insurance business is reflected in the communication with individuals, groups or organisation and in the facilitation of the exchange of information which will eventually persuade the target group, organisation, or individual that the offer is right. The decision on the choice of the promotional method is determined by available promotional tools, characteristics of the target market, aptitudes and dexterities of the sales personnel, available distribution channels and service features (Kotler, 2001). Nevertheless, a problem arises while determining the effects of a promotion, i.e. how to establish feedback loops between the service recipient and service provider. In order to have benefits from promotion, a particular subject must have an adequate plan of conducting, harmonization and communication supervision. One of the possible methods to achieve this is to carry out a survey, which the authors of the paper used to obtain an insight into bancassurance. There were 2,500 questionnaires sent to the clients of the banks’ branches on the territory of the Southern and Eastern Serbia of which 1,560 participated in the survey. Complete answers received from 1,025 respondents are further analysed.

The greatest number of respondents of the survey is male 74.4% (Graph 1a). As far as the age distribution is concerned, the majority of interviewees (over 50%) belong to the group aged 30 50 (Graph 1b).

(а) Distribution of interviewees by gender (b) Distribution of interviewees by age

Graph 1. Distribution of interviewees by gender and age

1343

More than 80% of the interviewees (87.20% to be precise) opine

that there is a lack of media coverage and representation of the attributes of

the bancassurance service, and this problem is accompanied by insufficient

data on what banks offer this service, under what conditions and at what

price. With regard to the media which could be used to promote

bancassurance, the respondents (43.20%) believe that the joint use of

television and the Internet will be the best means of advertising

bancassurance, since those are the media that nowadays provide a wide

range of users with fast and effective information. However, 23.20% of the

respondents believe that television solely will be an ideal method of

advertising, while 14.20% of the respondents give preference exclusively to

the Internet. Such an attitude of potential bancassurance beneficiaries

towards electronic media is understandable because the ability to reduce

transaction costs of interaction between buyers and sellers of insurance

products has always been a primary motivation of buyers. Furthermore,

these media enable the very advertisement to draw attention and arouse

interest of a potential user. The practice has shown that there is no marked

interest of insurance beneficiaries in purchasing insurance products via the

electronic distribution channels (Trembly, 2001), so that only fewer than

2% of insurance products have been bought via the Internet. Only 2% of

the interviewees give preference to written media (newspapers) (Table

15). Brochures and leaflets printed by insurers and handed out at points of

sale or sent to policyholders, big posters, and professional magazines

belong to other means of public information and their share in the total

media coverage is negligible.

Regardless of the chosen media of advertising, the interviewees

(78.2%) believe that there must be a persistent and continuous bancassurance

advertisement which will considerably shape the decision to use this

insurance sales channel.

Table 15. Media which might give the best results in promoting bancassurance

Ref. no. Media % interviewees

1 TV and the Internet 43.20%

2 Radio 16.60%

3 TV 23.20%

4 The Internet 14.20%

5 Newspapers 2.00%

6 Other media 0.60%

7 Others (recommendations, etc.) 0.20%

8 Total 100.00%

Source: Calculation of the authors

1344

For the time being, the insurance beneficiaries prefer to buy the

insurance products from the very insurance company (a traditional sales

channel), since, from the respondents’ (63.4%) point of view, there is a

difference in quality depending on the place where the insurance product

is purchased.

There are several obvious factors affecting insurance beneficiaries’

behaviour (Graph 2).

Graph 2. Factors that affect the purchase of insurance products

in the banks or insurance company

The primary criterion on the basis of which policyholders living under

conditions of low life standard decide to buy insurance services is the price of

the insurance service and the conducted survey points to these findings.

However, in spite of a strong competition among insurers, it is customary that

a low price implies a low quality service. Therefore, policyholders must be

well-educated, and that is the reason why it is upon the seller to interpret the

best offer of an insurer and propose the best combination to the insured. As

the insurance business rests upon the mutual confidence, the seller must be

aware of the fact that it is hard to gain confidence, but is easy to lose it. Since

the most important component of confidence in the insurance business is a

fair and fast payment of claims for compensation or the sum insured, it is

personal experience or other people’s experience with one insurer, spread

through the word-of-mouth, which brings about the enhancement of

consumer confidence (Odalović,&Ugrinov,2012). In the respondents’

opinion, this factor takes the third place on the hierarchical ladder of factors

affecting insurance beneficiaries’ behaviour. Motivational factors of sales

personnel include: quantitatively measurable goals, an earnings possibility,

an incentive system, a wish for business success, service attractiveness,

service benefit assurance, job security and secure earnings, an inclination to

friendship and establishing social contacts, written and oral recognition,

paying attention to the sales personnel, self-confirmation of a person while

competing with others, freedom to do the job in one’s own way, the use of

1345

personal creativity and initiative, good interpersonal relations. The degree of

the influence of the above-mentioned factors is individual and depends on the

traits of a particular person. In order to successfully sell insurance services, an

employee should possess a high level of self-confidence and motivation

which ensures an aggressive method of selling insurance services.

CONCLUSION

The development of bancassurance as an insurance distribution

channel has been considered a significant model of the development of

the European financial structure since its appearance in the 1980s. Financial

crises have demonstrated that the main concern of the insurance sector

should not be an introduction of new services, but a better communication

of existing services to customers, which would not only put greater

expectations and pressure on the sales network, but also increase its

responsibility. It is, therefore, commonly claimed that the value of every

insurance company is as high as its sales network is. The concept of cross-

selling banking and insurance products is a novelty for both banks and

insurance companies, and is useful for both entities, since it enables not

only a short-term, but also long-term broadening of the structure of assets

and liabilities in the process of financial intermediation, as well as the

attraction and retention of service buyers. In Europe, this distribution

channel has enjoyed considerable success; in the US bancassurance started

developing later, while it is relatively new for Asian countries. However,

professionals and scholars agree that bancassurance has a future; yet it is

necessary that the bank management knows to recognize it. It is a concept

which was, is, and will always be an important sales channel of life-insurance

policies in particular. In the Republic of Serbia, as in many other developing countries,

this insurance distribution channel has not been sufficiently exploited. A modest share of premiums earned through the bancassurance distribution channel is among the lowest shares of all observed shares in other European counties. Nevertheless, the conducted analyses demonstrate that the noticed continuous growth of premium will continue in the future and significantly contribute to an increase in the revenue of insurance companies. A substantial correlation, implied by high Pearson coefficient values, between bancassurance, life insurance, and non-life insurance premiums does not indicate a causal relationship between these values, so that the identification of the determinants of insurance development requires further research. One of the factors affecting the development of this distribution channel is sales promotion, as the effects of bancassurance are not only the result of modelling its mechanism, but also of promoting its advantages. The results of the survey carried out among the financial service beneficiaries in the Republic of Serbia point to the insufficient media coverage and

1346

representation of the services which can be obtained through bancassurance. As for the media which might be used for sales promotion, the interviewees (43.20%) believe that the joint use of television and the Internet would be the best tool for advertising bancassurance, since those are the media that provide a wide range of users with fast and effective information. For the time being, the policyholders are more inclined to buying insurance products in an insurance company, because the respondents (63.4%) hold that the quality of an insurance product depends on the place where it is purchased. The price of the insurance product, which is by rule lower when it is distributed through the bancassurance channel, significantly affects the choice of the purchase channel. Other factors determining the choice of the channel include the speed of meeting the insurance claims, the level of staff expertise and the speed of completing the procedure.

Bancassurance is a perspective mode of co-operation of financial institutions, which reduces the price of services and enables the use of a set of synergistic effects – insurance companies use the bank’s clients’ database and its extended branch network in order to maintain a contact with buyers, while banks, by offering new products, bind their clients more closely and strongly, and generate income through commissions. If the financial situation and credit activity of banks are stable, it is certain that bancassurance may be one of the generators of premium growth, particularly in the area of life insurance. In the developing countries, factors of insurance growth and, hence, of bancassurance are specific, and, yet, the insurance premium growth will significantly contribute to an intensive development of bancassurance in the Republic of Serbia in the forthcoming period.

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http://www.irisro.org/economics2014january

РЕАЛНОСТ И ПЕРСПЕКТИВА БАНКООСИГУРАЊА

КАО КАНАЛА ПРОДАЈЕ УСЛУГА ОСИГУРАЊА

У РЕПУБЛИЦИ СРБИЈИ

Јелена З. Станковић1*, Евица Петровић1, Невенка Војводић-Миљковић2 1Универзитет у Нишу, Економски факултет, Ниш, Србија

2Ерсте Банк а.д. Нови Сад, Филијала Ниш

Резиме

Пракса је показала да је услугу осигурања кориснику могуће дистрибуирати путем бројних канала (властита продајна мрежа осигуравача, продаја уз помоћ за-ступника и посредника итд.). Неадекватан избор канала може као резултат имати значајан губитак, без обзира на квалитет и ниво цене понуђене услуге осигурања, јер одлуке које су резултат политике дистрибуције, дугорочно посматрано, припа-дају групацији стратегијских одлука. Концепт продаје услуга осигурања кроз по-нуду банкарске услуге јесте иновација и за банке и осигуравајуће компаније, која је корисна за оба ентитета и омогућава како краткорочно тако и дугорочно шире-ње структуре имовине и обавеза у процесу финансијског посредовања, али и при-влачење и задржавање купаца услуга.

1348

Степен развоја и коришћења банкоосигурања, као и стечено искуство у прак-тичној примени, различито се може посматрати са аспекта развијених и земаља у развоју. Посматрањем европског тржишта може се закључити да су банке доминан-тан канал за продају производа животног и пензијског осигурања у Шпанији, Фран-цуској и Италији, док је ово учешће у Немачкој, Енглеској, Холандији, Швајцарској много мање због одредаба закона о контроли банака у пословима осигурања у циљу превенције могућих злоупотреба у пословању. Када је реч о неживотним осигура-њима, очигледан је напор банака да освоје тржиште осигурања имовине и осигура-ња лица од последица несрећног случаја. У већини европских земаља, осигурање до-маћинстава постало je изузетно значајно тржиште за банкоосигурање, док је учешће овог канала код продаје услуге осигурања моторних возила на ниском нивоу, испод

пет посто, осим у Француској и Белгији, где је проценат учешћа нешто већи.

У Републици Србији канали дистрибуције услуга осигурања дефинисани су

институционалним решењима, a Закон о банкама (Службени гласник РС, бр. 107

од 2. 12. 2005. године) експлицитно је банкама у Србији омогућио да се могу бави-

ти пословима заступања у осигурању. Међутим, банке су у овај сектор ушле тек

2007. године. Од тада до данас број банака које обављају послове дистрибуције

услуга осигурања се из године у годину увећавао, као и премија наплаћена овим

каналом продаје. Међутим, учешће премије стечене од продаје услуга осигурања

путем овог канала је међу најмањим у посматраном узорку европских држава.

Спроведене анализе указују на чињеницу да ће се уочени континуирани пораст

премије наставити и у будућем периоду и значајно допринети повећању прихода

осигуравајућих компанија. Значајна корелација, коју имплицирају високе вредно-

сти Пирсоновог коефицијента, између премија банкоосигурања, животног и нежи-

вотног осигурања не указује на узрочну везу између ових величина, тако да одре-

ђивање детерминанти развоја осигурања захтева додатне анализе. Један од факто-

ра који утиче на развој овог канала дистрибуције јесте и промоција, јер ефекти

банкоосигурања нису само резултат моделирања његовог механизма већ и промо-

висања његових предности. Резултати спроведене анкете међу корисницима фи-

нансијских услуга у Републици Србији указују на недовољну медијску заступље-

ност информација о услугама које се могу добити банкоосигурањем, због чега се

највећи број испитаника одлучује за куповину услуга осигурања директно од осигу-

равајуће компаније. Испитаници, корисници финансијских услуга, мушког пола ста-

рости од 30 до 50 година показали су највећи степен интересовања за банкооси-

гурање и мишљења су да је најбоље за рекламу о банкоосигурању користити телеви-

зију и интернет, јер су то у данашње време медији који пружају брзе и ефектне

информације широком кругу корисника.